Butter Mountains, Milk Lakes and optimal Price Limiters
It is known that simple price limiters may have unexpected consequences inirregular commodity price fluctuations between bull and bear markets andcomplicated impacts on the size of buffer stocks. In particular, imposinga lower price boundary may lead to a huge buffer stock, e.g. to a ?buttermountain? or a ?milk lake? and this is a real problem for regulators sincestorage costs may become impossible to finance over time. The relationbetween price limiters and the size of buffer stocks is nontrivial and theremay exist some optimal price limiters which require only weak marketinterventions and thus provide a rather inexpensive option to regulatecommodity markets. In this article, we use a simple commodity marketmodel to explore the relation between price limiters and the averagegrowth rate of the buffer stocks. It is found that these optimal price limiterlevels are simply the minimum values of unstable periodic orbits of theunderlying deterministic system.
Year of publication: |
2004
|
---|---|
Authors: | He Xuezhong ; Corron N ; Westerhoff Frank |
Publisher: |
Triangle Journals |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Commodity markets, price limiters and speculative price dynamics
Westerhoff Frank, (2005)
-
Introduction to the Current Issue
Marji, Lines, (2012)
-
Marji, Lines, (2012)
- More ...